Although many leaders and manager attended economics classes in school, many actually did not learn much more than supply and demand. This why may managers are surprised at how some economic notions have been directly applied in strategy and management, with largely positive results.
For example, economists often advocate the use of auctions to set prices and make conclusions about markets especially in rare or scarce commodities. In public sector strategic planning, it might be useful to use the same ideas and models to design auctions which shape the economy. For example, bidding on licenses, advertising and the use of statistics and data. Government can sell information which informs trends in business and governance and which can be helpful in predicting various real world events such as the progress of Ebola virus disease or forthcoming job and unemployment statistics.
Conditional price offers developed by economist mean that public sector data consumers commit to pay a certain price for information or data. This way consumers will take their bidding more seriously and government could budget based on expected income generated.
Every public sector organisation has challenges with rising costs and shrinking budgets and ageing infrasturcture. Obviously you don’t need an economist to tell you why it is important and how to do it. However, you need an economist to do particular things in this cost framework. Public sector organisations which spend a lot of their budgets on transportation and communitcation like the police and the correctional services face complex optimization problems that an economist can solve through linear and non linear programming to enable the sector benefit from lower prices and costs, even though they many not physically see these changes.
Data coming out of the public sector can be analyzed into complex models to forecast key financial variables, inclduing GDP growth, inflation and unemployment. Economists with statistical skills used to be hugely relied upon to predict turning points in the economy, but that has all changed. Now your public sector organisation can capture its own data, store and analyze large bodies of data, sift through such data to uncover information on transactions, patterns and usages, as well as finetune their strategic plans and impact on the population.
In traditional public sector management, public sector services are produced inadequately and many pubic sector consumers expected inadequate attention. So the matching theory ensures that demand is constantly higher than supply. This prison space would be inadequate, there would be insufficient cashiers at the power office to receive payments for public power supply etc. Economists would be able to focus the minds of public sector consumers on the need to fit more realistically in directing resources or decisions ie match health officers to hospitals, match transport resources to drug distribution lines and match transport resources to inmate numbers in jails rather than to manager numbers in head offices.
Economists can help public sector organisations to determine how to invest free funds to increase organisation ability to increase income by valuing different options and using better pricing and increasing organisational liquidity. Here, economists can help formulate innovative income generating ideas like inmate employment programs and parole exchange programs in the corrections service for example.
The main idea of this article?
Public sector managers may want to pay more attention to their need for the input of economists. The first step to succeeding exceedingly as a first mover public sector organisation may be to connect with a first thinker economist.
Adapted From Material by Robert Litan